Nigeria’s ability to land sufficient amount of private investment will be decisive not only this year but for the next decade, if the economy of Africa’s most populous nation is to truly provide enough opportunities for a growing population and curb rising poverty.
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The numbers show the government can’t achieve much on its own.
It most certainly will take more than Abuja spending N500 billion ($1.3 billion) yearly in social investment programs to lift nearly 100 million people from poverty or create jobs in a country where unemployment rate is in double-digits and at a six year-high.
The government simply doesn’t have enough resources to pilot a $400 billion economy, not when the annual budget has at no point in time in the past decade ever reached as little as 10 percent of GDP.
This year’s budget of N10.5 trillion ($29 billion), though the biggest budget on record in naira terms, if shared equally among the country’s estimated 200 million people comes to N52,800 per annum. That’s a paltry N4,400 monthly and is equivalent to less than 10GB of internet data.
Receiving N4,400 monthly is equivalent to N146 (46 US cents) per day, that’s not even up to the $1.9 daily spend of extremely poor people.
South Africa, by comparison, had a budget of 1.8 trillion rand ($126 billion) in 2019, 37 percent of the country’s GDP.
That amount is five times the size of Nigeria’s budget and is despite South Africa having less than a third of Nigeria’s population.
Simply increasing the budget by a trillion naira or two each year will still fall short of requirements in the short to medium term.
If government spending in Nigeria is not going to help the economy shake off weak growth, then perhaps private capital needs to be incentivized to play a bigger role.
But as things stand, Nigeria has found it tough to attract the private capital it needs and that helps to partially explain why the economy is stuck with low growth that’s sub 2 percent.
According to data by public data agency, the National Bureau of Statistics (NBS), Nigeria attracted an average of $222 million each quarter in 2019, an alarmingly low amount for a country estimated by global consulting firm, Mckinsey to need $31 billion in investment each year for ten years to bridge vast gaps in infrastructure alone.
Neighbouring Ghana, which is less than a quarter of Nigeria in terms of population and economic size, beat Nigeria to the top FDI destination in West Africa in 2018 when it attracted some $3.3 billion.
Nigeria’s struggle to attract foreign direct investment is not due to a scarcity of capital as there’s, in fact, a global capital glut that has been unshackled by low-interest rates in developed economies.
Rather it’s due to the reckless treatment of existing investors, inconsistent and mostly bad government policies and the lack of political will to open up the economy to new money.
Much will rely on the reforms the government is able to undertake in the next year or two in setting a foundation for better economic performance.
